Business Eyes The Bottom Line Of Health Plan
Many companies see higher short-term costs, but fiscal control could produce savings later
TAKE one-seventh of the American economy and turn it on its head.Skip to next paragraph
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That, in essence, is what the Clinton administration plans to do with the American health-care system. The changes the White House envisions will ripple throughout the economy. If enacted, the plan would:
* Cause some workers to lose their jobs.
* Help large businesses that offer health-care coverage and hurt small businesses that don't.
* Force the huge medical industry to operate by new rules that have never really been tried before.
``This will be the most significant piece of legislation to come down for small businesses in decades,'' predicts Leslie Aubin, health-care policy analyst for the National Federation of Independent Business (NFIB).
``We have no true, natural experiments, which we can rely on'' for guidance, says Jon Gabel, director of employee-benefits research at KPMG Peat Marwick, an accounting firm. ``We don't have a [comparable] situation where we have put an entire economy on a managed-competition model.''
Under the Clinton plan, government would manage the medical industry as never before. All businesses, even the smallest ones (with the help of temporary subsidies), would have to provide a certain level of health insurance. Companies would join insurance pools to spread out the costs of policies. Government-imposed boards would determine just how much doctors could charge for various procedures.
Given the vastness of this change - and how little historical precedent there is for it in the United States - policy analysts disagree over what the plan's overall economic impact would be.
``It's a plus,'' says Mary Jane England, president of the Washington Business Group on Health, a national organization of large employers. ``If we don't do anything about the entitlement [growth] trend, the deficit will just grow....''
``To have this as part of an act of Congress seems like extreme folly,'' counters June O'Neill, professor of economics at Baruch College. ``You wouldn't do this with any other industry.''
A few weeks ago, the Employment Policy Institute released a study coauthored by Professor O'Neill. The study suggested that if the federal government forces all businesses to offer a minimum health-care package to all workers, some 3 million people would lose their jobs.
Other studies suggest a much lower job loss. Last year, the Employment Benefit Research Institute (EBRI) estimated health-care mandates would throw some 200,000 to 1.2 million workers out of jobs. The wide variation depends on the estimated value of health benefits.
Clinton supporters are quick to point out that none of the studies is based on the administration's numbers. The EBRI estimates, for example, were based on various scenarios where the average annual cost of health benefits for an employee ranged from $970 to $2,430. The O'Neill study assumed a high level of cost - $2,400 for the average employee and $5,900 for the average family. The administration says the benefits of its plan would cost less: $1,800 for an employee and $4,200 for a family.
Several analysts are skeptical that the administration's plan will really cost so little. Mr. Gabel of Peat Marwick points out that large companies - those with the clout to get the lowest insurance fees - already pay substantially more for the same kinds of benefits that Clinton is proposing. According to Gabel's survey data, firms with more than 200 workers will pay an average of $2,050 per single worker and $5,292 per family this year.
So, in the short term, the Clinton health plan will probably cost more and drag the economy down more deeply than the administration predicts, he says. But in the long term, the plan could provide a big economic boost.
``In the long-run, taxpayers, I believe, will be much better off,'' Gabel says. Even if the Clinton plan just reduces the rate of growth in health-care costs from 11 percent to 8 percent a year, that could free up $2.4 trillion in the economy in one decade.
VIRTUALLY everyone - conservatives and liberals alike - believes it's crucial to slow the rate of growth in health-care costs. Rapidly rising health-care costs divert money from more productive investments, leave employers less money to boost wages and salaries, and force large companies and unions into fierce and repeated confrontations over who will pick up the tab for medical insurance.
``Without comprehensive reform, no working family in this country can be assured of health-care protection,'' says Denise Mitchell, spokeswoman for the Service Employees International Union.
A few years ago, she says, the union estimated that 80 percent of US strikes were caused by disputes over health care. ``It's certainly eating into wages of workers as well as their spending power. We've simply got to rein it in,'' Ms. Mitchell says.
The question, then, is whether the Clinton plan is the way to go about this comprehensive reform. The plan is so vague and novel that, like the proverbial blind men and the elephant, the answer depends on where one stands.
Big businesses will benefit because they typically pay for a high level of employee health care. Organized labor will also benefit, since its members typically work for these large corporations. Many small businesses, especially service-sector companies with low-paid help and slim profit margins, would be set back.
The plight of these small businesses may not be as important to the economy as the gains for big business, says Edie Rasell, an economist with the Economic Policy Institute, which has close ties to organized labor.
``We know that productivity increases are greater in the manufacturing than in these small service firms,'' she says.
NFIB, which represents small business, says just the opposite. ``Part of this plan amounts to a huge bailout of the big business community,'' says Ms. Aubin. ``We need to have reform. But this is not the way to do it.''